Cruisehead tax cut passes

Bill allows Juneau to 'double dip'

Posted: Monday, April 19, 2010

By PAT FORGEY

The House of Representatives voted to overturn most of the cruise ship head tax on the last day of the Legislative session, largely mirroring an earlier action by the Senate and paving the way for the tax rollback sought by the industry.

Final approval by the Senate is still needed, but the rollback passed there easily.

Juneau Reps. Beth Kerttula, a Democrat, and Cathy Muñoz, a Republican, voted for the cruise tax cut, which passed 27-13. That followed earlier approval by a vote of 17-3 in the Senate, where Juneau's Democrat Sen. Dennis Egan voted for the cut.

Kerttula said she got a lot of pressure from tourism businesses to vote for the reduction.

"The small merchants have made their case," she said.

Many tourism businesses saw a decline in business last year, are unable to hire and in some cases out of business, she said.

Those who backed the voter-approve cruise ship initiative, which in 2006 imposed a $46 dollar head tax, as well as pollution regulation and other measures, warned against disregarding the will of thevoters.

"Nobody even brought up the fact that we're repealing an initiative of the people by doing this," said Rep. Bill Thomas, R-Haines, who voted against the rollback.

The bill passed in both bodies is expected to return about $22 million a year to the industry by reducing the head tax by $11.50 for all passengers, and then another $15 for those that visit Juneau or Ketchikan. That would lower the head tax to $19.50 for most passengers, a nearly 60 percent cut.

The deal with the cruise industry to reduce the tax is in exchange for the Alaska Cruise Association dropping its lawsuit against the state. Gov. Sean Parnell negotiated the deal, and the bills passed by the House and Senate appear to comply with the terms of the deal.

Rep. Carl Gatto, R-Palmer, said the state was getting too little compared to what it's giving up.

"We're reducing the amount of money that (is) coming in to the state substantially," he said.

One thing left out of the agreement that some lawmakers pushed for was a requirement that the industry would return the ships to Alaska they are pulling out this summer. Some legislators said that the state should have sought such a commitment in exchange for the tax break. Cruise officials expect 142,000 fewer passengers this year due to ship redeployments.

Cruise industry representatives have said they moved ships out of Alaska because of the head tax. They said they'd like to see tax reductions, more state money used for marketing and reduced regulations - then they might bring ships back, Gardner said.

"We don't have those elements all in here," she said.

The Legislature was never provided with information showing that Alaska's head tax was unreasonable, she said.

"Is Alaska really out of line here?" she asked.

Afterward, Kerttula said that she too doubted the cut would bring ships back.

"I don't know if this is going to work, I sincerely ... doubt it, but I'm willing to make an effort to see what happens in the next couple of years," she said.

An amendment sponsored by Kerttula would require a report to the Legislature on the effect of the tax cut on revenue and travel to and from Alaskan ports.

After the tax cut was adopted by the Senate, much of the debate in the House revolved around dividing up the reduced head tax revenue among cruise ports.

Rep. Thomas, vice-chairman of the House Finance Committee, led an effort that would have prevented cities that collect their own head tax from also getting state head tax money.

The two cities that have already adopted their own head taxes are Ketchikan and Juneau, represented by the House's majority and minority leaders.

Rep. Kyle Johansen, R-Ketchikan, brought the Senate's version of the head tax reduction, not House Finance Committee's version, to the floor. That version allowed the two cities to collect both their own taxes and to be eligible for state taxes, which Thomas called "double dipping."

Juneau Mayor Bruce Botelho was at the Capitol Sunday, making sure the state's top cruise port remained eligible for state funding that has helped it build docks and other infrastructure.

Chip Thoma, President of Responsible Cruising for Alaska, said he was holding off comment until he saw the final version of the bill after action by the Senate.